Home prices soar in Q1 as economy reopened

MANILA, Philippines — Housing prices soared in the first quarter as the real estate sector reaped the benefits of the reopened Philippine economy, with expectations to rise further before the end of 2023.

Data released by the Bangko Sentral ng Pilipinas on Friday showed the Residential Real Estate Price Index, a measure of the average change in the prices of various housing units, leaped 10.2% year-on-year in the first quarter. This was faster compared to the 5.7% rate recorded in the same period in 2021.

On a quarterly basis, it rose at a slower pace of 1.4% compared to the final quarter of 2022. 

Introduced in the first quarter of 2016, the RREPI is based on banks’ data on actual mortgage loans granted to acquire new housing units only.

BSP data showed bank loans taken out to purchase new houses grew 16% year-on-year in the first quarter due to renewed demand for units within and outside Metro Manila. 

Domini Velasquez, chief economist at China Banking Corp., expects home prices to climb further by the end of 2023 due to anticipated lower interest rates. Despite this, she noted demand is shifting. 

“We note though that there is a recalibration in terms of demand in housing. Areas outside of NCR are becoming an attractive destination due to flexible work arrangements, especially of BPOs, and a shift in preferences of Filipinos after the pandemic,” she said in a Viber message.

Broken down, shelter prices in Metro Manila contracted 7.3% on-year in the first quarter owing to declining prices of tempered condominium units increases observed in duplexes, single-detached/attached houses, and townhouses.

Quarter-on-quarter, home prices in areas in the National Capital Region shrank 4.3%. Outside, prices inched up 4.4%. 

Nicholas Antonio Mapa, senior economist at ING Bank in Manila, agreed with Velasquez assessment. 

“In the coming quarters, we can still expect growth to continue given that the economy remains open and we see a pickup in pent-up demand for renovations and new purchases,” he said in an emailed commentary.

“However, growth will likely be capped given elevated borrowing costs given how sensitive real estate purchases are to increases in borrowing costs,” Mapa added. — Ramon Royandoyan